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Cablegate: Ship Deal with France to Derail Bulgarian Military

VZCZCXRO0558
PP RUEHDBU RUEHFL RUEHKW RUEHLA RUEHROV
DE RUEHSF #1122/01 2611353
ZNY SSSSS ZZH
P 181353Z SEP 07
FM AMEMBASSY SOFIA
TO RUEHC/SECSTATE WASHDC PRIORITY 4298
RUEKJCS/SECDEF WASHINGTON DC PRIORITY
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RHMFISS/HQ USEUCOM
RUEHBS/USEU BRUSSELS
RUEHNO/USMISSION USNATO 0940

S E C R E T SECTION 01 OF 02 SOFIA 001122

SIPDIS

SIPDIS

E.O. 12958: DECL: 09/17/2017
TAGS: MARR PREL BU
SUBJECT: SHIP DEAL WITH FRANCE TO DERAIL BULGARIAN MILITARY
MODERNIZATION?

Classified By: DCM Alex Karagiannis for reasons 1.4(b) and (d).

1. (S) Summary: Several Bulgarian defense officials
expressed concern over a plan, currently in its final stages,
to purchase four Corvette class ships from France at a cost
of over one billion dollars. Such a large expenditure for
ships that do not fill an operational need would, according
to our sources, threaten to derail all other priority
modernization projects. This plan is viable solely because
of political pressure to present a deliverable to President
Sarkozy during his early October visit. Although at least
one Ministry of Defense official believes that the sale will
go through unless the United States intervenes, Ilko
Dimitrov, the Deputy Head of the Defense Committee in
parliament is confident the deal will be abandoned or at
least delayed by several years. As the Bulgarians grapple
with military modernization, we and NATO can help keep
Bulgaria focused on priorities, practicalities and fiscal
realism. End Summary.

Possible new purchase threatens to break the bank(

2. (S) French President Sarkozy's planned early October visit
has ignited a run on possible deliverables, especially given
France's role in freeing the Bulgarian nurses in Libya.
Among the flurry of possible, mega-sized deals is one
involving defense procurement. XXXXXXXXXXXX
expressed deep concern over a plan by the
Bulgarian Ministry of Defense to purchase four French
Corvettes. According to XXXXXXXXXXXX
there is no operational need
for these ships and the purchase is not in line with
Bulgaria's defense modernization priorities. Although he did
not quote a dollar figure, other sources have estimated that
the deal would cost more than one billion dollars, not
including armaments. (By comparison, Bulgaria's defense
budget for 2007 is between 640 and 700 million dollars.) In
addition to the large initial price tag, XXXXXXXXXXXX said he feared
that follow-on costs associated with this purchase would be
significant and would force massive cuts elsewhere in the
armed forces in coming years.

3. (S) According to a different source connected with the
Ministry of Defense, the French shipbuilding company Armaris
will be awarded the contract during French president
Sarkozy's visit. As an offset, a French shipyard will place
orders for the construction of 15 combat vessel hulls from
the Flotsky Arsenal Ship Repair Yard in Varna. This source,
like XXXXXXXXXXXX, was not convinced that the strategic
benefits of the purchase were worth the cost.

4. (S) A third source, XXXXXXXXXXXX,
also confirmed that this deal is underway and
lamented that it appears to be going forward despite not
being one of the official force goals for Bulgaria. His
assessment was that such a large naval purchase would have
serious adverse consequences on the modernization efforts of
the other Bulgarian services.

Possible Timelines

5. (S) In addition to political factors outlined above, a
clearly concerned XXXXXXXXXXXX hinted that some highly placed
officials in the Ministry of Defense would stand to benefit
from the deal. He stopped short of asking the U.S. for any
kind of assistance in this matter, but said he feared that
the deal would go through, unless "powers higher than the
Minister of Defense" were engaged on the matter.

6. (S) Ilko Dimitrov, Deputy Chair of the Defense Committee
in Parliament, differed with XXXXXXXXXXXX on the likelihood
of the deal being concluded. According to Dimitrov, the
document set to complete the tender with Armaris has been
drawn up and that negotiations with the French are in the
"final stage." But he believes the project is almost certain
to be abandoned or at least delayed several years. While the
Bulgarian Navy and certain players within the Ministry of
Defense are still pushing hard for the purchase, the price
tag is simply too large and it will never pass through the
Defense Committee in parliament. Dimitrov noted that the
French government and Armaris both had strong lobbies in
Bulgaria. He believes that Sarkozy will push hard for the
project during his visit to Sofia, and that either Prime
Minister Stanishev or President Parvanov will have the
difficult task of explaining why Bulgaria will have to back
out on the project at this late stage.

A military rationale?

SOFIA 00001122 002 OF 002

7. (S) Although nearly all our interlocutors agreed that the
purchase of the French Corvettes was not a strategic
priority, they all admit that design and construction of
Multi-Purpose Corvette (MPC) Class ships is listed as one of
Bulgaria's defense priorities in the 2015 Modernization Plan
approved in 2004. While the United States supported the
intent of the 2015 plan, we have also focused on its flaws,
namely that Bulgarian planners did not attempt to prioritize
new programs between the military services and did not
balance program costs against a realistic annual budget. The
2015 plan is a compilation of each service's wish lists for
new procurements. Within the Ministry of Defense, the plan
is widely seen as defunct, and its imminent reform is a
recurring hope. Nevertheless, champions of a Corvette
purchase can point to the 2015 plan as justification,
irrespective of its comparative merits.

8. (S) To solve this lack of priority focus and to prevent
similar ones in the future, Dimitrov suggested the
advisability of NATO assistance in crafting a revised
modernization plan to replace the current one. An impartial
evaluation by NATO of the strategic merits of Bulgaria's
upcoming modernization programs would be key to maintaining a
budgetary balance between the services and to keeping
Bulgarian military modernization on track.

9. (S) Comment: The juxtaposition of high-level politics and
massive defense sales have stirred the pot here. While the
Corvette issue has elements of garden-variety inter-service
squabbles over funding, the sheer size of this potential
purchase, has generated friction inside the Ministry of
Defense and beyond. Bulgaria has a history of reaching large
deals and then backtracking or even canceling them. From
Dimitrov's comments it sounds as though cooler heads will
prevent this sale from proceeding to conclusion. We will
pulse -- and encourage -- decision-makers to focus on genuine
NATO priorities and fiscal realities. To do that we will
work with NATO to help Bulgaria craft a more forward-looking
and more realistic modernization plan. End Comment.
Beyrle

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